When It Comes to Pulling CO2 Out of the Air, the Bigger the Better

Coauthored by Serkan Birgel

Capturing CO2 through direct air capture (DAC) could be on the verge of liftoff. When Occidental Petroleum's subsidiary Oxy Low Carbon Ventures announced in March that it could build 70 DAC facilities by 2035, the carbon capture, utilization, and sequestration (CCUS) industry was impressed, intrigued, and a little incredulous. Never had anyone imagined DAC being built up at anywhere near that pace or scale. Guidehouse Insights' Global CCUS Project Tracker, scheduled to be published in early 2023, suggests at least 2.25 million tons per annum (Mtpa) of DAC capacity is in the global project pipeline, across all stages of project development.

DAC is a relatively expensive and energy-intensive technology that absorbs CO2 out of ambient air, where the CO2 has relatively low concentrations (around 0.04%). This technology has been brilliant in theory but very hard to financially justify. That could be about to change. 

Everything Is Bigger in Texas

Oxy had already announced plans to build a 1 Mtpa DAC facility in the Permian Basin and have it online by 2024. By comparison, the world's largest operational DAC plant—the Orca facility in Iceland, built by Swiss startup Climeworks—has a capacity of just 0.004 Mtpa. 

To put Oxy's plans in perspective, the 1 Mtpa DAC plant Oxy is building in Texas would compare with about 46 Mtpa of currently installed capacity globally, according to Guidehouse Insights' Tracker. Today, DAC has a global CCUS market share of less than 1%. If Oxy builds the 70 DAC plants at the 1 Mtpa capacity that it has planned for the Permian Basin, it would increase global capacity by more than 50%, thus demonstrating the opportunity for first movers in the carbon removal space.

To continue down the path to net-zero emissions by 2050, the International Energy Agency estimates the world will need 1.6 billion tonnes per year of CCUS capacity (that is 1,600 Mtpa) installed by 2030 and 7.6 billion tonnes (7,600 Mtpa) by 2050. 

The case for DAC is highlighted by the Intergovernmental Panel on Climate Change's recent report, which reasoned that "all modelled pathways that limit warming to 1.5°C … involve rapid and deep and in most cases immediate [greenhouse gas (GHG)] emission reductions in all sectors. … and deploying CO2 removal methods to counterbalance residual GHG emissions." 

Big Projects Need Big Money

DAC technology has been held back by its price tag, with capture costs possibly exceeding $300/tonne. This compares to costs of less than $20/tonne for point sources such as natural gas processing and chemical production, which have highly concentrated CO2 streams. By pulling all the available financial levers—including offset markets, tax breaks, and other government incentives—Oxy and its partner Carbon Engineering aim to knock the price down to $100/tonne. 

But they can only do that through economies of scale. In other words, they need to build a whole lot of DAC plants, and make them much bigger.

The Bipartisan Infrastructure Law (BIL), which was passed in November 2021, was generous toward DAC. In May, the U.S. Department of Energy announced it was launching the $3.5 billion funding to establish regional DAC hubs for large-scale CO2 removal, an initiative started by BIL. 

Oxy isn't alone. Several noteworthy startup companies also see the potential of DAC in a decarbonized future and the dollars are following them. In March, Heirloom Technologies closed a $53 million Series A. In April, Climeworks won itself a $650 million infusion. Now that carbon removal has an essential role to play in the path to net zero, the spotlight is firmly on the industry to deliver at scale. Carbon removal credits are slated to increase in significance in voluntary carbon credit market, a subject that will be explored in subsequent blogs.